Baking blockchain into IT services

By Stephanie Kanowitz

May 10, 2019

Touted for its security and recordkeeping, blockchain is picking up steam in the public sector. A new report shows that growth in spending on distributed ledger technology by federal, state and local governments is beginning to spike.

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Specifically, federal spending on blockchain is expected to grow from $10.7 million in 2017 to $123.5 million in 2022, while state and local spending will increase from $4.4 million in 2017 to $48.2 million in 2022, according to the recent IDC report titled “U.S. Government Blockchain Spending Forecast, 2019–2022: Healthy Four-Year Growth Predicted for Government Blockchain Spending” (document # US44935218).

“It addresses a lot of issues about data accuracy, ownership of data -- I like to use the term data authority -- and being able to have a record of all changes made to X,” Shawn McCarthy, research director at IDC Government Insights and author of the report, told GCN. “X could be a piece of data sitting in a database. X could be an order that eventually includes a change order for something that’s being built or something that’s being purchased for the government…. It creates a record that can be confirmed and double-checked and agreed to by all parties.”

For example, if a military unit orders 200 pairs of boots and 20 are missing when the delivery arrives, blockchain simplifies the process of retracing steps to find out at what point the boots disappeared. That’s because as the delivery changes hands from vendor to shipping company to destination, a blockchain record can track the handoffs, including the number of items received.

The most immediate growth area for blockchain will be in IT services, rather than hardware and software solutions, the report adds. By making it a piece of middleware or a microservice, other applications can call a blockchain function and attach cryptostamps to transactions, assets and system access permissions, it states.

This makes sense, McCarthy said, because many things in government are stitched together in systems of systems. “Because it’s part of a larger system tacking other things together, the IT services component related to that becomes important and it becomes fairly large,” he said.

Ultimately, he said in the report, asset management, identity management and smart contracts will be the leading blockchain solutions in government.

Agencies can take one of two paths to blockchain. One is to build, install and manage the distributed ledger themselves in a data center, and the other is to get it as a service from a third-party provider. Most agencies can do the latter, McCarthy said. A systems integrator can help them not only understand how to use blockchain, but what applications will reap the most benefit.

Despite the ease of use, blockchain has its detractors, mainly among those concerned about what data is being tracked, he said. For instance, some governments use blockchain for birth certificates in addition to issuing a paper version, but questions arise about tracking aspects such as nationality and citizenship.

“In theory, your blockchain record could start at your birth and follow you your whole life with more and more things building on it: your immunization record, school records, bank account, credit,” McCarthy said. “Those are a lot of social discussions that really have to be dealt with carefully.”

Although spending on blockchain has so far been slow, McCarthy sees an uptick now that he expects to accelerate later in the year and stick around. He predicts that blockchain will eventually become “invisible” as it is baked into systems. For instance, it will be built into software for enterprise and human resources management systems.

“It’s going to be one more knob on your dashboard,” he said. “You’re not going to be thinking about it as much as you’re thinking about it right now.”